Global engineering and construction deals insights: Q2 2018

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Executive summary

Despite favourable macro trends with US corporate tax reform, buoyant housing market, and an otherwise very robust M&A environment, the E&C sector has lagged the broader market. Overall M&A activity in Q2 2018 deal value increased 2% versus Q1 2018 despite a decrease in volume in the current period. On year-over-year basis, Q2 2018 continues to lag the same period in 2017 with a negative M&A activity growth of -16%.

The rise in building material prices due to the turbulent trade policies is likely to further challenge potential buyers as sellers face new profitability pressures. Amidst these tensions, inorganic growth is expected to increase within borders while a weakening dollar will possibly make US companies potential targets. Finally, skilled labor shortages would drive more consolidation as companies will look to strategically acquire talent.

Despite a slow start to M&A activity in 2018 within the sector, the  underlying fundamentals fueling growth remain strong with continued demand for housing, addressing long-delayed infrastructure improvements and new investment. As the year plays out it remains to be seen how much an impact the current trade tensions have in reigning in otherwise strong underlying fundamentals in the sector.

E&C deals activity

Key trends/highlights

  • Deal value in Q2 2018 was $21.3 billion, increased slightly by 2% from last quarter but decreased 20% compared to Q2 2017.
  • There were 499 deals this quarter, 20% and 28% lower than Q1 2018 and Q2 2017, respectively.
  • Average deal size was $107.6 million increasing 4% from Q1 2018.
  • Although there was no megadeal announced this quarter, one $6.1 billion acquisition received approval. 
  • North America is trending upward as an M&A target, both in volume and value.
  • While domestic transactions continue to drive M&A volume, cross-border deal value decreased by 53% compared to previous quarter.

“M&A activity in Q2 increased versus Q1 despite a decrease in deal volume over that period. While current underlying sector fundamentals remain strong (e.g., US corporate tax reform, buoyant housing), trade policy actions between the US and key trading partners, will likely weigh on M&A activity as the year plays out."

Colin McIntyre, US Engineering and Construction Deals Leader

Contact us

Colin McIntyre
US Engineering and Construction Deals leader, PwC US
Tel: +1 (646) 818 7013
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Michael Sobolewski
Engineering and Construction leader, PwC US
Tel: +1 (313) 394 3299
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Jonathan Hook
Global Engineering and Construction leader, PwC US
Tel: +44 (0) 207-8044753
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